Most equity funds underperformed benchmarks: study

As many as 88% of the large-cap equity funds underperformed their benchmarks over the one-year period ending June 30, according to the latest analysis by S&P Dow Jones Indices. Further, 62% of mid-cap/small-cap equity funds and 83% of government bond funds underperformed their respective indices as well in the same period, which saw the equity markets facing a lot of headwinds in the form of depreciating currency and current account deficit on the back of higher crude oil prices. According to the analysis, while the BSE 100 index gained 12.94% in the one-year period ended June 30, 87.88% of all large-cap equity funds failed to match those returns in the same period. Duration affects metrics Interestingly, a higher number of funds managed to outperform the benchmark over a longer time frame. In the three-year period, 78.35% of all large cap funds under-performed the BSE 100, while 48.08% funds underperformed over 5 years. Meanwhile, the first half of 2018 also saw a stark difference in the performance of the broader indices “with a higher proportion of capital chasing large-cap stocks,” as per the analysis. The BSE 100 index, which is the benchmark for equity large-cap funds, ended flat at 0.34% during this period, whereas the BSE 400 MidSmallCap index, the benchmark for equity funds in the mid-cap and small-cap space funds, was down 12.74% during the same period.

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